Computer Simulation of Reallocating Resources among Growing Regions

Hagen Bobzin
University of Siegen, Siegen/Germany

Based on the approach presented by Buhr (2001, see below) the computer simulation is concerned with the growth effects on the generation, the distribution, and the use of income. At first the private and public sectors as well as the state fix certain parameters which determine their behavior for the entire period under consideration. The simulation computes the results with respect to regional and national growth. The ensuing parameter variations reflect regional competition. The outcomes of the simulation runs are then used to determine an optimal behavior with respect to sectoral objectives. On the one hand, the private sectors try to increase an overall utility index which depends on the time path of consumption per capita; in this sense the private sectors compete for consumable and investment commodities. On the other hand, it is the task of the public sectors to supply public capital to the private sectors and to strengthen the productivity of labor by expenditures on education. Moreover, the public sectors may allocate subsidies to attract private capital from the other region. The means needed for public expenditures mainly stem from a taxation of private income. According to this idea the public sectors organize and determine the results of competition. Finally, the state imposes a tax on public incomes and reallocates these resources in order to improve the situation of one region or of both regions together. Now the state can be interpreted as an institution correcting the process of competition to some extent.

Source: Computer Simulation of Reallocating Resources among Growing Regions. Presented at the Eleventh Advanced Studies Institute in Regional Science, August 14-22, 1998 - Munich, Germany. In: J. R. Roy, W. Schulz (eds.), Theory of Regional Competition, Baden-Baden: Nomos, 2001.

A Macroeconomic Growth Model of Competing Regions

Walter Buhr
University of Siegen, Siegen/Germany.

Abstract: In the growth context, this paper concentrates on the supply-demand determination of regional equilibrium incomes in regional goods markets as a framework for discussing the implications of competition among regions. Prices at the regional and national level are fixed so that all variables are of real magnitudes; there are no money markets. Regional factor stocks (private and public capital, labor force in the form of human capital) and regional demand set up the barriers to economic growth (cf. generally Barro, Sala-i-Martin (1995)). The analysis is restricted to two regions embedded in the State. The supply side of the model is represented by different regional production functions which generate regional factor demand. Demand-side determination of equilibrium regional incomes arises from the definitions of national accounting enriched by basic behavioral relationships. Substantial consideration is given to the equalization of regional supply and demand in diverging cases (e. g., excess demand in one of the two regions). Changes in factor stocks (differential equations) maintain the dynamics of the model. Regional competition is expressed by variations of regional and state parameters. Their numerical influences on growth will be dealt with in Bobzin (2001, see above) .